Cash ISA allowance cut 'would cause chaos' as choice of products dips ahead of Budget
Product choice for cash ISAs has recorded its biggest monthly dip in almost two years as speculation persists over a limit cut in next week’s Budget.
Moneyfacts UK Savings Trends Treasury Report data has found the choice of cash ISAs fell to 640 deals from 658, its biggest monthly fall since January 2024, down from the record high in September 2025, when it stood at 662. The number of savings providers overall remains a record high of 156.
The current annual Isa limit is £20,000, of which all can be put into cash if savers wish.
Rumours that the cash Isa limit could be reduced have been circulating for months, with recent speculation suggesting a £12,000 annual limit was under consideration. The move is said to be aimed at persuading more people to invest in stocks and shares, rather than putting money in cash ISAs.
Rachel Springall, Finance Expert at Moneyfacts, said: “Cash ISAs are under threat, with rumours persisting of a cut to the £20,000 yearly allowance, a futile attempt to push risk-averse savers to invest.
"This year has been a milestone for cash ISAs, with the choice of deals and number of providers in this sector reaching record highs. Savers have flocked to cash ISAs to shield their money from tax, no doubt boosted by worries over a cut to the yearly allowance, with the Bank of England showing almost £30bn of deposits made since the start of April.
"However, despite the strong start to the new tax-year, the choice of cash ISAs felt its biggest monthly fall since January 2024, and the average easy access ISA and one-year fixed ISA rates are now at their lowest levels in two years.
“Savers find comfort in cash ISAs, particularly those who are being hit by fiscal drag and do not want to risk their pot in a stocks and shares ISA.
“If the cash ISA allowance gets cut down to £12,000, not only will it cause chaos from a retail funding perspective, but it will give savers less reason to use a cash ISA in the first place. Maxing out a yearly limit of £12,000 will earn less than £500 in interest based on the current average returns of a one-year cash ISA or fixed bond, currently below 4%, which is within the Personal Savings Allowance for both a higher-rate and basic-rate taxpayer. Therefore, unless the PSA is abolished, savers who chase top rate returns would take home more interest outside of a cash ISA and there will be a greater argument for investing in a stocks and shares ISA.
Rachel Reeves told The Yorkshire Post last month that new rules are needed to get savers better returns.
She said: “We want to help people to be able to save for mortgages, but we want people to get better returns on the money they are investing.
“To put money in an ISA or indeed in a pension means that you sacrifice spending today to save for the future. And at the moment, often returns on savings and returns on pensions are lower than in comparable countries around the world. I do want to make sure that when people put something aside for the future they get good returns on those savings.”